ACE has been working with ethanol producers and the farmers who supply them to monetize farming practices under the 45Z clean fuel production credit, and we have discovered an impractical deadline about nutrient budgets which overlaps with the fall harvest and risks penalizing farmers.
Earlier this year, Treasury appropriately recognized the crops used to produce fuel in 2025 and 2026 were planted before the U.S. Department of Agriculture’s (USDA’s) nutrient guidelines were final, so for the fuel produced in those years, it waives the requirement that farmers write a nutrient budget before applying fertilizer or manure. But because it is tied to the year the fuel is produced rather than the year the crop is grown, it causes two gaps.
First, as written, if a bushel of 2026 corn is ground on December 31, it qualifies for the 45Z safe harbor, while the same bushel ground on January 1 would not. This needs to be corrected.
Second, under USDA’s rules, the clock for next year’s crop starts at this year’s harvest, so a farmer needs a finished budget before the first fall pass of anhydrous ammonia, manure, or phosphorus and potassium. With harvest underway, most farmers simply cannot get a soil test, a written budget, and, in some cases, an outside expert’s sign-off done before their first fall nutrient application. Because USDA requires nutrient management for every low-carbon crop, missing the budget not only costs a farmer the nutrient credit, it disqualifies the field entirely, including any credit for reduced-till, no-till or cover crops. Without safe harbor relief, a large share of 2027 acres will be disallowed, excluding the farmers that 45Z is meant to reward. Since 45Z went into effect for 2025 and is currently set to expire at the end of 2029, losing the 2027 crop squanders monetization of farming practices for a big share of the program’s life.
Our conversations with farmers and ethanol producers have also led us to discover that farmers who use manure face an additional timing problem. USDA’s rules require the nutrient budget manure test to be taken after the previous harvest. Most liquid manure in the Corn Belt goes on in a short fall window: immediately after harvest, after soils cool below 50 degrees as Extension recommends, and before state winter restrictions take effect.
For these reasons, we have asked Treasury and USDA to take the following steps:
- Treasury and the IRS must make clear that the 45Z safe harbor covers all fuel made from the 2025 and 2026 crops, including fuel produced in 2027
- Treasury and the IRS must extend the safe harbor to the 2027 crop
- USDA must allow livestock producers to build their nutrient budgets from their most recent manure tests taken under state requirements
These commonsense requests keep farmers from being penalized for missing a planning step due to an impractical deadline which interferes with this year’s harvest.
